December 2001 Unemployment Rate A Surprise.

The unemployment rate rose slightly to 5.8 percent in December, surprising most analysts and suggesting the unemployment rate may peak at a lower level than in past economic contractions, according to the Employment Policy Foundation (EPF). Since the official beginning of the recession, the unemployment rate has increased 1.5 percentage points from the 4.3 percent level in March 2001.

“Over nine previous recessions since 1948, the average increase in the unemployment rate from the beginning of a recession to the subsequent peak unemployment rate has been 3 points,” said EPF President Ed Potter. “The unemployment peak was reached, on average, 14 months after the beginning of the recession. The decline in economic activity during this recession appears to be on the mild side compared to some previous downturns. Based on the data for the mildest four of the past nine recessions, the unemployment rate could peak around 6.3 percent in the spring.”

Although total employment was lower, the decline was smaller than in the previous two months. Among workers age 25 and over, total employment increased by 82,000 in December compared to November, to a total of 114.3 million, suggesting that recovery may already be underway for this core group of the labor force.

For college graduates, the unemployment rate remained at a low 3.1 percent – essentially full employment – showing the continued demand for education and skills in today’s labor market. Most of the unemployment increase was concentrated among workers with the least training and experience – workers over age 25 with less than a high school diploma and workers under age 25 across the education spectrum.

The median duration of unemployment increased to 8.2 weeks from 7.6 weeks in November, which is to be expected for this stage of the recession, Potter said. Further increases in the duration of unemployment can be expected in the coming months and may add further strain on state unemployment insurance systems.